Germany's Export Control Law in the New Millennium
By Michael Rietz
April 8, 2002
I would like to give a brief presentation of the extensive export control law in Germany, especially as it has developed over the last decade. As an attorney in Muenster, Germany, I have been involved in the defense of executive directors of German companies who were found to have made illegal exports, especially to Iraq.
Since the events of the Persian Gulf War in 1991, export control measures in the Federal Republic of Germany have been significantly tightened twice-once in 1990 and again in 1992. The penalty framework for foreign trade violations had been drastically increased and the range of mechanisms for effective export control had been expanded. These changes were brought about by the uncovering (by such entities as UMSCOM and the IAEA Action Team, to which David Albright, the President of ISIS, belonged) of extensive illegal deliveries by German companies to Iraq, as well as to Libya and other states of concern. A wave of criminal proceedings against German companies took place thereafter. Many of these proceedings, however, were suspended or ended with the abatement of an action or minor penalties due to the weak legal framework at the time.
The international community accused the Federal Republic of Germany was of not having done enough to prevent such illegal deliveries. This criticism was not entirely undeserved. On another occasion (see presentation 2001/Moscow), I had described in detail just how easy it was, in some ways, for German exporters to mislead the authorities with false data. However, it should be stated clearly that those violations were the exception; the majority of German companies have conducted business without cause for objection and have observed the strict export regulations. Even today, after all the tightening of measures, it is still necessary that the exporter provide the authorities with full and truthful information. An ill-intentioned exporter can still deceive the control authorities with skillfully contrived circumventing transactions and by using seemingly legitimate front. However, it has become more difficult for these "black sheep" to mislead the authorities and the risks of attempting to do so are greater. Absolute control does not exist; even a police state would not be able to prevent certain exports if their real background was skillfully disguised. Thus, it depends to a considerable extent on the honesty of the exporter. For example, an exporter who plans an unauthorized export to Iran, could be tempted, obviously, to declare that the products are intended for the NATO country Turkey and that they would remain there; he would certainly obtain the required authorization for Turkey without any problems. Therefore, these exporters must be sensitized through extensive publicity of the matter so that they recognize that their antisocial behavior is ostracized not only from a legal-dogmatic point of view but also in a political and moral way.
The Legal Basis for Export Control in Germany
In comparison to many other countries, Germany has no basic prohibition on exports with exemption possibilities (conditional approval), but rather the opposite: the principle of the freedom of export is effective (according to the legally standardized principle in § 1 of the Foreign Trade Law (AWG)). In Germany, a constitutional, legally guaranteed freedom of foreign export exists with a legally enforceable individual claim to the issuance of an export permit if a legal claim exists. This system is unknown in the United States. However, this categorical export freedom is subject to extensive restrictions. Thus, for numerous exports, an export permit has always been required. In recent years, this authorization requirement has been considerably expanded to include many new products and destination countries. Today, the stringent export control system in Germany is a forerunner worldwide.
The legal classification system in Germany is, essentially, determined by the Weapons of War Control Law (KWKG), the AWG, and the Foreign Trade Regulation (AWV). In addition to the weapons of war list as defined by the KWKG (nuclear, biological, and chemical = Part A), other weapons of war (Part B) are listed whose production and export are subject to surveillance. The so-called export list (AL), an attachment to the AWV, whose Part I lists weapons, ammunition, and armament material (Section A) and other products (B), must be observed; there, approval requirements for specific listed products are designated for individual countries only. The effective trade embargos of the Security Council of the United Nations and the European Union are also partially included in the AWV or adapted administratively into the effective export law.
In addition, the joint list of products (products, technology, and software) with both a civil and military application, "dual use," has gained particular significance in the EU (C) = EU Dual Use). Part II contains products of plant origin. Legally, the destination countries are currently differentiated into K countries (particularly sensitive countries) and L countries (mainly OECD countries).
The Dual Use Problem (Products with Dual Use, i.e., Civil and Military)
In practice, it is often difficult to determine what falls in the category of dual use products. The classic case is the pesticide plant, which later turns out to be a poisonous gas factory. For this case, several discussion groups at the EU level and elsewhere have attempted to create greater uniformity. Today, for example, specific machine tools or other parts that could be used for the production of missiles or Uranium enrichment have also been included. The novel EG Dual Use Regulation of mid 2000 initiated an increased cooperation of the administrations and consequently an EU harmonization of the regulations and applications, which has brought about additional clarity. For example, joint control lists (Appendix 1 = List of Products of the International Regime, Appendix IV = List of Products for Transport within the EU) have been developed, because the products on these lists are considered so sensitive that they need to be controlled even for transport within the EU community.
Meanwhile, the question has come up whether it is enough to just develop these lists, because suspicious destination countries have often attempted to obtain a different product than the one listed, which can be converted with great expenditures and used for the intended purposes.
The International Control Regime
Furthermore, the worldwide efforts for curbing illegal exports have lead to the creation of international organizations at the political level.
The international organizations' decisions do not create instant legal binding effects, but are first adapted into national export control laws as an individual responsibility of the member countries. Thus, they do not participate in the approval procedure in the member countries. Their decisions, however, have a great influence on the formation of the national export control regulations.
The so-called "Australian Group" (AustG), founded in 1985, has also listed more than 50 primary products used for the production of chemical and biological weapons. The Secretariat is located in the Australian Embassy in Paris.
The "Nuclear Suppliers Group" (NSG), founded in 1975 as the "London Club," seeks to prevent the proliferation of armament that is used in the production of parts and materials for nuclear weapons.
The "Missile Technology Control Regime" (MTCR), founded in 1987 in London, seeks to prevent the proliferation of products that could be used for the production of (missile) carrier systems.
The "Wassenaar Arrangement" (WA), founded in 1994/95 as a successor organization of the COCOM in the Dutch city of Wassenaar and in 1996 in Vienna (current seat of the Secretariat), seeks to control conventional armament. It took over and continued with the product control lists of the CoCom for conventional weapons.
Germany, as well as the U.S., is a member of all four regimes.
These international control regimes, which are either under international law or informal government agreements, are steadily growing, admitting new members to achieve their common political goal (the prevention of dangerous proliferation, the non-distribution of weapons of mass destruction). They currently have a great practical effectiveness.
The Catch-All Clause
Relatively new in the German export classification system is the general clause, or the so-called "catch-all clause" (for example, in paragraph 4 of the dual use regulation of the EU), whereby all products are subjected to approval requirements to the extent that the exporter has knowledge of an actual or intended use for weapons production. This was necessary to prevent the so-called "circumventing transactions," where a suspicious order was divided into so many individual deliveries (lots), that the respective individual value was not or not yet included in the international control lists.
Application of the Export Penal Code by the Courts
The criminal courts that had to deal with export violations by individual firms had difficulties applying and interpreting the penalty provisions to the export law. The district courts, in particular, often do not have the knowledge in complex foreign trade law, and have to go to great pains to obtain the currently effective versions of the laws and lists, and they have to rely on external experts (for example, from the BAFA), and they are also often confronted with specialized trial lawyers, who appear all over Germany and who use their specialized knowledge to intentionally make the work of the courts and the final sentencing in criminal proceedings more difficult. I have also taken advantage of these circumstances in my role as defense counsel of arraigned exporters (Karl Heinz Schaab, Dietrich Hinze, and others); however, I have always sought pragmatic rather than dogmatic solutions. I have advised the courts about the problems before or during the criminal proceedings in a suitable manner, and I have thus been able to "negotiate" relatively mild sentences, offering the court guilty pleas to certain counts and short criminal proceedings. The rapidly changing regulations of the foreign trade penal code have generated various problems for the German judiciary, which cannot be addressed here in any detail. However, in many other cases, they have recently led to an "idling" of criminal regulations, because proceedings were not even initiated. Consequently, despite the good intentions of the legislators, "culpability gaps" were often created when the penalty framework was increased.
In the following, cases have been selected that show that some criminal courts do understand how to narrowly and strictly interpret the penalty regulations:
a) Warhead Fuse for Missiles:
In the case of Anton Eyerle of Kaufbeuren, the question was whether an object, which had been taken apart into individual pieces, would or would not still fall under the Weapons of War List (KWL). The question was important for the culpability.
Incidentally, Eyerle was a neighbor and friend of nuclear spy Karl-Heinz who had sold secret blueprints for the gas ultracentrifuge gas centrifuge (GUZ) for uranium enrichment to Iraq. Later, Schaab was also indicted and defended by me.
Eyerle had produced impact and proximity fuses for the Al Hussein missile, a modified Scud missile, in large numbers and delivered them to Iraq. Eyerle exported 2400 proximity fuses completely assembled. Determining a penalty for this deed presented no problem under the KWKG and AWG. In a delivery of impact fuses, however, the fuses had not been assembled, but had been exported as individual parts. However, they could be assembled with relatively little effort (with simple, common tools and devices, here: screwdriver, pliers, and soldering iron). The court therefore invoked the principle of easy assembly.
The district court (LG Augsburg) applied the previously developed "kit" theory, according to which an object listed in the weapons of war list does not lose its attribute as a weapon of war when disassembled into individual components or kits. As a result, Eyerle was sentenced to five years and six months in prison. The Federal Court (BGH) upheld the sentence and the kit theory. Thus, this theory has become generally applicable to those exports subject to authorization.
b) Missing Parts in an Export Order
To date, the case in which certain parts may be missing from an order, has not been finalized by the courts. It is still unknown how the federal court, which only had to decide in the case that all required parts were delivered for a weapon, will rule on the case wherein nonessential, easily obtainable, or easy-to-produce parts were removed or intentionally left out. The District Court (LG) of Rottweil had to rule on this matter. The case dealt with the delivery of machine guns wherein the firing pins and the firing pin springs had been omitted. The LG ruled: "Similar to a once complete weapon of war, in which merely nonessential or easily obtainable parts are missing, does not loose its attribute as a weapon of war, it does not lose its attribute as a weapon of war when these parts have not yet been installed in the weapon, when these components are easy to obtain or produce, making it possible to assemble an operational weapon of war. This interpretation does not exceed the boundary of the definition 'weapon of war' and is therefore not an impermissible analogy to the disadvantage of an indicted exporter. The mere lack of the firing pin and the firing pin spring represents only a minor obstruction to the functionality, because it can be eliminated with relatively simple means and little technical effort." (The verdict then goes on to describe in detail just how little technical and financial effort has to be spent to replace firing pins and firing pin springs). There is much to indicate that the BGH also endorses this further development of the interpretation.
c) Small Quantity of Tritium
Another interesting case of export violation has occupied the judges. The defendant was the leading German expert for tritium and the head of the tritium laboratory at the Max-Planck Institute of Plasma Physics. He collaborated in the delivery of a quantity of 0.8 grams of tritium to Pakistan, where it was to be used "for the test operation of a 'tritium handling plant,' used to develop nuclear weapons technology." The tritium was supposed to be isotope-pure, but in reality it was contaminated with deuterium. Because of the contamination, the quantity of tritium contained in the delivery was not utilizable for weapons technology. The defendant had, in fact, been aware of the fact that the Pakistani purchase order of tritium was "intended for nuclear weapons technology;" however, he assumed that 100 grams of isotope-pure tritium were required for a hydrogen bomb and he thus reasoned that the ordered quantity of 0.8 grams "was not dangerous in the sense of weapons manufacturing." Tritium is used in small quantities also in the civil field, such as in neutron generators for medical irradiation (the yearly civil use in 1980 amounted to about 3 grams in the Federal Republic of Germany). The court assumed that a quantity of 100 grams was required for hydrogen bombs.
The court had to discuss in detail the question of whether 0.8 grams of tritium has to be considered a substance that is intended or should be essentially considered as intended for nuclear weapons in the sense of the KWL (weapons of all kinds that contain nuclear fuels or radioactive isotopes, or that are specifically intended to incorporate or use such...). Specifically, the court investigated whether tritium was considered a nuclear fuel for nuclear weapons in the sense of No. 1 KWL, based on its objective composition.
If so, the classification as "essential" depends on whether the actual quantity was sufficient to "fulfill an essential function" in a nuclear weapon, or if it was sufficient that the substance "according to its composition" in abstracto, regardless of the quantity, could fulfill an essential function in nuclear weapons.
The BGH gave clear answers to all these questions, which represented a largely new judicial territory. Highly purified tritium falls under the fuel definition of the KWL, because "it is suitable for releasing considerable quantities of nuclear energy via core fusion within this substance itself, as well as via its core reaction with deuterium. As a result, it is considered a "nuclear fuel."
The answer to the quantity matter was not any less explicit. The court ruled: "Whether the substance in the sense of No. 2 in the KWL is 'essential' for a nuclear weapon should be evaluated solely on the basis of whether it is suitable, based on its composition, for fulfilling an essential function in the nuclear weapon, regardless of whether the quantity is sufficient in the specific case. This applies especially when, as in this case, the classification as 'essential' is based on the legal definition; this is based solely on the function of the substance (in this case: nuclear fusion) and the intended use, but not on the order of magnitude." The BGH based its interpretation on two more arguments: "Even a quantity that is less than the required quantity for use in a nuclear weapon could be sufficiently increased by additional purchases from other sources by the entity from which it should be withheld." In addition, the further development of the nuclear weapons technology could lead to results, whereby a smaller quantity (like the 0.8 grams supplied on the BGH case) could already fulfill an essential purpose in such a weapon.
With respect to the alleged intended use, the BGH briefly established that the classification as nuclear fuel does not change because the tritium supplied "was intended only for a trial operation of a tritium handling plant intended for nuclear power weapon purposes." The nuclear and therefore weapon of war attribute are only inapplicable if the tritium had been intended for civil use or some similar purpose. This, however, was not the case, because the BGH evaluated the intended use based on the purpose for which the supplied substance was intended by the export receiver. The military classification does not depend on the direct use for a "nuclear weapon." The fact that the substance was to be used in Pakistan in a "tritium handling plant used to develop nuclear power technology" definitely eliminated the assumption of a civil application of the tritium.
d) Scoops for the Gas Ultracentrifuge for Uranium Enrichment
Another example of the practice of criminal courts demonstrates that the courts are able to competently handle the apparently complicated matter of the application of the penal codes in the field of the foreign trade violations:
In July of 1998, the District Court (LG) of Stuttgart sentenced a defendant to prison because he had made several deliveries of products for military and nuclear programs to Pakistan in the 1990's. The issue in this case was the question of the authorization requirement for so-called "scoops" for gas ultracentrifuges (GUZ). The GUZ technology is a uranium enrichment technology, which had, for example, been employed by the Iraq in the 1980's with massive support from German suppliers. On another occasion, I already reported my insights as a trial attorney on the proceedings against Karl-Heinz Schaab, which involved the supply of rotors made out of carbon fiber, other special parts for GUZ, and technical support for the test stand of a prototype working under laboratory/vacuum conditions. I also reported on my defense of Dietrick Hinze, who supplied steel rotors for GUZ, and special magnets and bearings for centrifuges.
In the GUZ, uranium hexafluoride is subjected to a separation process caused by rotation. The required extremely high rotation of the rotor, i.e., more than 1000 Hz (a cylinder made of steel or a composite material such as carbon fiber), is powered by a high frequency motor. The U 235 and U 238 Uranium isotopes are separated at this point because of their low mass difference due to the centrifugal forces. The heavy isotope U 238 is subsequently located closer to the rim of the rotating cylinder (depleted uranium, waste) and the required (enriched U 235) is located closer to the center. By means of the so-called "scoop," a small thin-walled tube, which is made of a special alloy of aluminum, magnesium, and silicon, the enriched uranium hexafluoride can be extracted from the cylinder, and be passed on to the next centrifuge. Even for only small quantities of highly enriched uranium (HEU), which can be used for nuclear weapons, an entire cascade of such centrifuges is required.
The scoops need to be bent and pressed for their installation in the centrifuge. The defendant had exported these removal hooks in straight condition, i.e., they had not yet been bent for installation. The end receivers were the "Khan Research Laboratories" in Kahuta, Pakistan, a known uranium enrichment plant, with which the proliferation experts were already well acquainted because of its past nuclear activities.
The question was whether the straight, i.e., unfinished, small tubes should also be included in the export list (AL). The defense presented the view that such was not the case, because an essential processing step was still missing. The court, however, did not agree, and argued that semi-finished scoops are also special parts of the GUZ, especially since the final processing is relatively easy and does not require any special tools (they can even be manually bent and inserted). The small tubes were not unsuitable for their intended purpose simply because they still had to be adjusted. Also, they were only insignificantly incomplete. Therefore, the hooks were "ready to be installed" in the opinion of the court. A direct parallel can be drawn here to the easy "assembly" of the above-cited case of Anton Eyerle with respect to the weapons of war control law.
These examples demonstrate clearly that defendants, at least sporadically, cannot expect clemency and leniency before the court in the interpretation of the complicated legal regulations of the AWG. Even in borderline cases, they should expect the most unfavorable legal interpretation.
Administrative Amendments of the Export Control Act Since 1990
Aside from numerous legal developments since 1990, which I cannot discuss in detail here, much has also changed on the administrative level. It should be emphasized therefore, in particular, that the control authorities (Department of Commerce, Customs, Customs Criminal Institute, Federal Export Administration) now work considerably more efficiently, have more personnel, and have considerably more know-how. The utilization of the Internet has made information more accessible and transparent to the user. The departments have been divided differently. Accordingly, the responsible federal agency (now: the Federal Bureau for Economy and Export Control, or BAFA for short) used to process around 100,000 applications per year with a staff of about 85 employees. Today, with four times more employees, only 25,000 export applications are processed by the BAFA. It can easily be imagined how inadequate those past examinations must have been. In this regard, it is also interesting that the current fraction of denied export applications is considerably below 0.2%, which can be taken as an indication that the companies thoroughly inquire before applying to see if their planned export is legally possible.
Today, the BAFA, as the approval authority, also informs about the newest developments in detail on its homepage. In addition, since 1992, the BAFA has been publishing the Handbook for Export Control (HADDEX for short) regarding the sensitive area of export control; it is a loose-leaf notebook that is regularly updated and also contains, in addition to the wording of all laws and regulations (AWG, AWV, AL, KWKG, edicts from the Department of Commerce, UN decisions, EU regulations), and many types of practical indications, which make the work considerably easier for the exporter. BAFA personnel are also available to provide support and information through many technical departments. In any case, the honest exporter today is in a better position than at the end of the 80's.
Export Control and Telephone Surveillance by the Authorities
Illegal exports are more difficult now for two additional reasons. The Finance Administration and Customs conducts random control of export shipments by means of company audits. The authorities also undertake surveillance of correspondence and telecommunications of companies and individuals.
Since the reform of the export laws in 1992, the Customs Criminal Department of Cologne (ZKA), which has jurisdiction for the export supervision as investigative agency, is authorized to check the correspondence, postal traffic, and the telecommunications (telephone, fax, and e-mail) of affected companies or persons in suspicious companies. This surveillance requires the prior approval of the District Court of Cologne, decision by three permanent judges, when pertinent suspicious circumstances exist. This presents another effective instrument for preventing, or at least making it difficult to carry out, illegal exports in the early planning and preparation stages, especially if an exporter with bad intentions is initially unaware of the surveillance measures. There is thus always the risk of being discovered. The problems that arise in connection with the newest crypto technology, which creates new difficulties for effective surveillance, cannot be discussed in detail here. Still, these preventive measures in the early stages are practical, because the very late customs control system alone cannot not always reliably prevent the planned criminal act, i.e., the illegal export for various reasons (high export volume, difficulty for the customs agent on site to recognize the legal export relevance, etc.). These surveillance measures have thus clearly increased the chances of the discovery of prohibited exports.
Surveillance of Technology Transfers and Technical Support
Export controls include technical support and the transfer of "know how" and technical knowledge by letter, e-mail, fax, etc. Even a "non-resident" employee of the company, i.e., a foreigner (for example, a trainee, or an intern) who, for example, works in the research and development department and who comes into contact with sensitive material, is now directly included under the law. In some cases, the penalty for allowing this person to obtain illegal technical support may be up to five years. However, from the practical point of view, the prosecution of this illegal transfer may be very difficult. I am not aware of any such case to date in Germany.
A particular focal point of the German export control has always been the objective of "non-proliferation," i.e., the non-distribution of weapons of mass destruction (nuclear, biological, and chemical weapons) and their respective carrier systems (e.g., missiles). However, the past has shown that it is not sufficient to merely control the export of "hardware," but that the corresponding technological documentation must be controlled as well. Relevant knowledge for the armament field can especially be found in universities and research facilities.
In the same way, therefore, the transfer of sensitive "software" and sensitive "know-how" (technological knowledge), must, as a rule, also be controlled in its oral form. The respective technological knowledge is available, on the one hand, in institutes and in the German industry (for example, manufacturers of certain machine tools in the fields of material technology and reactor technology), on the other hand, however, it may also be found in the natural sciences and engineering research facilities and even in the departments of the German universities and polytechnic colleges. As a result, these sectors have recently become addressees for approval regulations.
A couple of practical examples follow. The transfer of technology takes place in the context of national and international congresses, trade fairs, technical exhibits, workshops, conventions, symposiums, joint research and development projects, and in training and educational programs. First of all, personal contacts are created during these events, which later offer an informal and unsuspicious continuous possibility for know-how acquisition. A variant of the transfer of technology is the exchange of engineers, scientists, professors, lecturers, doctoral candidates, and students between proliferation countries and Western industrial nations. Associations, societies, private and cultural initiatives, as well as technology centers that were founded and act for citizens of critical countries in Western foreign countries, offer a good basis for contacts and mutual information exchange. Another possibility for obtaining knowledge consists in the targeted inquiry of experts or technical personnel of industrial countries, for example, in connection with the construction or maintenance of production plants.
In the university sector, the following forms of "knowledge transfer" are conceivable: support for students about to graduate, doctoral candidates, post-doctoral candidates, exchanges at symposiums, and collaboration with guest scientists in conjunction with projects. Also considered is the "knowledge transfer" in the form of lending, for example, by permitting the use of a computer in which relevant data are stored. A "transfer" can take place by allowing access to files or by an oral exchange of ideas, wherein sensitive know-how is discussed.
No "knowledge transfer" occurs, however, when sensitive information is compiled by the foreign scientists themselves, to the extent that this work is based exclusively on generally accessible sources.
Dissertation and Masters theses are publicly available if they have been deposited according to the framework of the usual regulations in, e.g., - publicly accessible - departmental libraries. If a corresponding thesis, however, can only be obtained through the examining board or through the thesis advisor, it is not "publicly accessible" according to the meaning of § 45 of the AWV, thus, the transfer of the corresponding contents to strangers in the field would also have to be approved. The possibility of controlling sensitive Masters theses thus depends solely on the decision of the advisor. As a rule, he decides if the Masters thesis should remain with the Chair or whether it should also be placed in the library. Therefore, the adviser should abstain from transferring to the library Masters theses with sensitive contents. A similar problem also occurs with each decision about publications with sensitive contents. Here, it must be especially called to the attention of the holder of the Chair, to make him aware of the particular danger that publications with sensitive contents are made accessible to critical countries without control.
In the following five examples, which I am citing from the widely distributed bulletin of the BAFA, methodical elements regarding the activities of some countries in the area of knowledge transfer relevant to proliferation can be found:
A German research institute, which, among other things, deals with research in the field of biotechnology, employs a Libyan citizen in the central archive. This employee has access to all the information that the institute has accrued as well as information that is obtained while cooperating with other research facilities. On the occasion of a trip back home for the holidays, the particular individual is requested by unknown persons to "do his home country a favor." He was to copy as many documents as possible on one or more research projects and deliver these to a contact person in Germany.
It is known that Libya wants to expand its proliferation-relevant activities in the field of biological warfare. For this purpose, Libya is also dependent upon the discoveries of fundamental research. Even though the German research institute does not develop any actual biological weapons activities, its general research results are nonetheless useful for the development of biological weapons.
The employees of the chemical faculty at a German university are, amongst other things, dealing, with the production and processing of cyanides and fluorides within the scope of a research project. These substances can have many uses, most importantly in the field of galvanics and glass ceramics. The results of the research are presented in cooperation with a German firm at an international trade fair. Here, an initial contact is made with a Syrian trade delegation. The delegation leader indicates that his government would like to set up a production chain for processing chemical substances (including cyanide and fluoride) in Syria; at the same time, this business contact could serve to build a scientific collaboration with the chemical faculty of the German university.
The Syrian contacts are employees of an industrial complex that deals with the development and production of nerve-toxic weapons. Basic principles, as well as production knowledge about the treatment and handling of cyanides and fluorides, are insofar helpful.
A special project, "Turbulent Flow in Flight Technology," is created at a German university. The project is supposed to contribute to the optimization of air turbulences in civil missiles (for example, research and payload missiles). Upon inquiry, an offer is extended to a graduate student from India to work there on his doctoral thesis.
The doctoral candidate works in an Indian plant, which deals with the further development and construction of missiles with various ranges used by the military. The results of the test series from that special project may contribute to the improvement of the flight capability of Indian missiles.
A mutual exchange of scientists was planned within the scope of a bilateral research project with another country, for example, Syria (sensitive country on the country list K). The research work was supposed to focus on the field of supra-conducting magnets and the associated cryophysics. Supra-conducting magnets are mentioned several times in the export list (for example, AL position 0E001 and 3E201 in connection with 3A201-b). The supra-conducting magnets (and corresponding technology) are controlled, in particular, if they can be used for a uranium enrichment plant operating with the plasma separation process. The approval requirement was stated in § 45, Section 1 of the AWV.
Within the scope of a state cooperation project with a research facility in a non-K country (country list L), e.g., India, controlled knowledge about missile driving mechanisms was to be exchanged in work discussions and lectures. The objective of the project was the development of new driving mechanism technologies for civil space travel. Because of the possibility of misuse of this technology for (military) ballistic missiles, these products and technologies are also included in the exports list (for example, AL locations 9A005, 9A105, 9A007, 9A107, 9E001, 9E002, 9E101, 9E102). The approval requirement was stated in § 45, Section 2 of the AWV.
I have cited these examples, at this point, because one or the other representative of an institute or research facility will surely be confronted with similar case scenarios and this can represent a danger source in a sensitive area that is very hard to calculate. This needs increasing attention since the universities, in order to position themselves in the internationally competitive world, must accept guest students and guest scientists from all over the world.
In these examples, the question of the authorization requirement has to be asked. When in doubt, the affected companies and institutions are required to contact the Federal Export Bureau (BAFA).
Repressive Reactions and Prosecution of Export Violations
The legislator has not only established a regime with tighter measures that discourages violations but also, in a punitive way, made export violations hardly worthwhile anymore. While a few years ago, the companies that were caught with export violations could expect comparatively mild monetary penalties (prison terms were imposed only in very few cases), now, the threat of prison terms of up to 15 years in some cases - i.e., the highest current prison term that the German penal code allows - is real. The penalties are thus on the same level with the penalty considered for murder or manslaughter, which evokes a considerable deterrent.
The apparently lucrative export violations are no longer financially as profitable because today the exporter must expect that he will lose the entire proceeds (i.e., transaction volume) of the transaction if caught. This may drive a small company directly into ruin. For this reason, the German export regulations are now the most stringent in the world, a fact that many critics have already complained about, declaring that other NATO allies are therefore snatching away the lucrative contracts, leading to loss of jobs.
Loopholes have become considerably smaller, since the firms now have to comply with the following:
Supply an end destination declaration to the BAFA;
Check their customers with regard to their reliability;
Ensure that the customers will not transfer or re-export the product;
Name a so-called "person responsible for exports," who is a member of the management or the Board of Directors and who has a high personal responsibility with respect to the selection of personnel, surveillance, and organization of export control in the company;
Indicate the export control responsibility clearly in the organizational chart of the company and present it upon request (proof of reliability); make continuous improvements to the internal company export control system;
Regularly train the export employees in the export law, i.e., at least once a year, and evaluate the relevant technical literature;
Introduce internal revision and other control measures, which will in turn effectively monitor the efficiency of the company's export control operation; and
Be able to regularly obtain updated early warning indications from the authorities, which report any suspicious procurement activities by countries, organizations, and companies (and thus destroy the real or pretended "good faith" of the supplier, for example, as to the civil use of the export product).
The so-called legal circumventing transactions were considered hot tips for a long time: with this method, many companies exported via their French, British, Portuguese, or Greek foreign subsidiaries, or, particularly for critical exports, via several non-member countries of export control regimes. Incidentally, there had already been warnings about an "export control tourism." This danger has been somewhat abated since mid 2000 with the novel EG Dual Use Regulation, especially since the core issue was the creation of a so-called "general export permit." This represents a real harmonization piece of the European export control policy that has eliminated any previously different handling of export questions (content and legal proceedings) in the EU.
Complex Legal Situation
It must also be said that the export law in Germany has remained very extensive and complicated. Even for judges and lawyers experienced in the field, the law is still very difficult to understand. It asks too much of some companies. Implementation can result in significant costs, including training of coworkers and the incorporation of the export control in operations). As an example, I have brought along the flowchart of a private company, which has carried out training in export law in seminars and at the company (Foreign Trade Academy/AWA, Muenster). The complexity of the legal reality is very evident in this case.
Even large companies complain about this development. An experienced engineer and long-term export controller of the Leybold Group of Germany once graphically described in an article what the assignment of an export controller is, who is, by the way, hardly in danger of unemployment:
"Early in the morning, the export controller searches the Internet, to see if he can download an official journal of the European Community (EG), which is relevant for him, be it a regulation or a joint action, a decision or joint viewpoint. After the mandatory reading of the Federal Gazette (which is the official publication means for laws and regulations in Germany) and the American Federal Register, he must then decide if and how his newest knowledge can be translated for his company, perhaps via notices, memos, e-mails, training, etc." He labeled export surveillance against this background a "nightmare."
What really can be a nightmare for larger firms in specific cases is even worse for smaller firms, because they are no match for the subject and usually lack the in-house expertise of the larger companies. The danger exists that the good intentions of the legislator and of the authorities "slack off," because the companies, despite multiple support and training by public and private institutions (e.g., by the Chambers of Industry and Commerce, which have specialists in foreign trade law and which advise their business members; Dr. Kolb of IHK Bayreuth will speak in detail about this aspect in a moment), do not respect the regulations, simply because they do not understand them and are unable to interpret them. Because, after all, not only the complex German export law, has to be considered, but also the so-called re-export law; so that, if a German company wants to re-export products or services from the Federal Republic of Germany that it had originally imported from other countries, it must in some cases also take into consideration the corresponding re-export regulations of the initial countries of origin or export countries.
Many companies thus give up on export transactions for fear of burning their fingers. To this end, I quote a memo by an attorney who, as a specialist, advises companies in and executes export control:
"... We have in many cases advised against seemingly lucrative transactions, which at first bothered some of our clients, but which they appreciatively accepted after the Iraq investigation fiasco. And we appropriately helped a total of many more exports across the border, sometimes as midwife, sometimes as emergency doctor. We are glad if your exports bloom, but we would also like to ensure that you can sleep in peace and your employees can acquire and process contracts with a feeling of security. For this purpose, you must recognize the actual risks and those methods for eliminating these that are suitable for your company. You must be able to see the chances that appear continuously and find ways to take advantage of them in practice. For this purpose, you need fast and safe decisions based on comprehensive international legal knowledge and long years of practical experience. All of this leads to more planning security…
Export Law: Playground for a Few Specialists in Germany
Even in Germany, there are only a few specialists who deal with the subject of foreign trade law. None of the large attorney firms provide a comprehensive service in this area; there is not a single department for export control law in Germany. The few experts share a lucrative counseling business, which feeds on the fear of the companies because of their increased liability.
At the Foreign Trade Legal Day, which was held by the Center for Foreign Trade (ZAR) of the University of Muenster in the end of 1998, the developments and legal questions of export control were discussed in detail. In addition to over-regulation, several experts in the industry have complained that Germany often undertakes unilateral actions to tighten its already strict export control law, which in turn leads to competition distortions because the actions are absent in other EU countries. This can lead to the relocation of production sites and the loss of jobs.
The German Federal government justifies its taking of unilateral and strict actions in export control matters as necessary to avoid agreeing to a least common denominator agreement typical of the EU. In this way, Germany avoids legal concessions, especially in such a sensitive legal field as nonproliferation. Additionally, the German federal government has to act particularly sensitively in exports to countries that threaten Israel, out of responsibility for German history. Any shortfalls in this area would be condemned harshly. Such reactions are well known and appreciated as a result of the German deliveries to Iraq in the 1980s.
Harmonization and Simplification of Complicated Regulations
I, personally, do not believe in the enactment of ever more complicated and broad export regulations, which would virtually "cover" all sensitive export transactions. The German export list (AL) alone contains more than 1200 listed product parts. And loopholes always exist. It would be better, in my opinion, to create a compact, easy-to-understand export law, moving away from the extensive product lists and introducing more catch-all clauses, i.e. such specifications whose authorization requirement is not linked to a specific (listed) product, but which comprises all the products that are intended for a specific use. This makes the above-mentioned circumventing transactions more difficult, especially because due to the course of the increasingly faster technological change, goods and products that had not been included before in the export list can all of a sudden be used for military purposes. Necessity, thus, is the mother of invention and the sensitive countries will always find ways and processes for procuring new (apparently legal) substitute products, which fulfill the intended military use just as well. The product and utilization-related export control of the catch-all clauses appears therefore - despite the new problems that may arise from a penal point of view (see below) - to be the only sensible way. An older idea, which became doctrine within the frame of the CoCom already in the beginning of the 90's, should be revived: "higher fences around fewer products" and a reduction of the product lists to a "core list." Aside from this, the politics should name point blank those countries and companies, whose behavior give reason for worry. The bashful timidity to doing so is hardly understandable.
Companies have often complained, not without reason, about the difficulties of the application of the law due to the product lists, which have become too long and complex and which have so far additionally escalated due to the differences between the national lists within the EU. It has also been criticized that several individual positions on the list are not comprehensible. For example, it is not understood why products are listed therein that are used as high-tech components for entertainment electronics and are, thus, just about obtainable on "any street corner."
Admittedly, even the catch-all clauses are not always without problems and create a new dilemma because it is often difficult to exactly determine the authorization requirement for individual exports according to these general standards. Above all, the aspect of the "positive knowledge" of the actual or intended use is questionable because this often can be proven only with difficulty since especially the "dubious" receivers could disguise their actual intended use ever more skillfully. In addition, the warnings by the federal government are not always helpful because they often reach the companies too late, and do not contain the names of the "dubious" companies, are often outdated. Too often, the warnings become known to the importer, providing the dishonorable actors with sufficient time to change their appearance in the market and to rapidly change the name of their companies.
Outlook: The Future of Export Control in Germany
Thus, I rather plead for a tightening of control and surveillance measures, only in cases of suspicion or misuse, even drastically if needed. The widely prevalent law-abiding export trade has nothing to fear from these surveillance measures, all the qualms about basic rights limitations thus appear to me as merely academic clamor. And, after all, both sides would be served: the export-oriented industry and the surveillance authorities. The export law would be relieved of unnecessary ballast, the daily applicability would be structured more efficiently, and the authorities could focus more on the few critical cases. Because whoever risks diving into the jungle of laws today often finds that export permits, which are received in about ten days in the U.S., sometimes require a wait of up to half a year in Germany.
The control instruments for the non-proliferation of weapons of mass destruction must be further developed and harmonized in the future. Illegal exports bring only short-term profits. In the long run, they hurt the companies and the community.
Another improvement would be if the exporting companies in Germany were obligated to more effectively train the employees and the departments that deal with exports and provide suitable evidence about the implementation of this knowledge. In larger companies, it may also be a good idea if the employees of the business could report suspicious activities to a trusted appointee of the company without fear of reprisals. In this way, the moral pressure could generally be improved, and the planning of illegal exports could be nipped in the bud. In the United States, the Lockheed case in mid-2000 caused a great stir. The company illegally provided support of a Chinese company for satellite engine technology. In addition to an extremely high fine of $13 million, restrictions were also issued to modify the internal control systems of the company. The implementation of this new system was tested by independent certified public accountants.
In general, companies need to increase their own awareness of export control issues and problems. Government reporting to companies make companies more aware. Symposiums such as this one and the constant exchange between countries with respect to export control questions make it even more difficult for the bad guys to set up a favorable environment for illegal exports.